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Suicide bidding is a response to a tendering exercise in which a potential supplier, anxious to win business, submits a proposal to carry out the work for less than it will cost. These procurement processes are typically modelled as reverse sealed-bid auctions with the lowest bid winning.[1]
The motive for such bidding is to keep the company's skilled labour employed, even if the project only breaks even or makes a loss.[2]
This can result in poor quality work, poor service and debates over loopholes in contract wording in attempts to charge clients extra,[3] or even insolvency on the part of the contractor.[4]
The practice has particularly been noted in construction bidding. Around 2010, suicide bidding was widespread due to the economic crisis and strong competition.[5] 2010 survey by the Chartered Institute of Building found that 82% of respondents believed that “suicide bidding” existed within the industry.[2] It was considered to have contributed to the financial collapse of British firms Connaught plc and Rok plc in 2010.[3]
The Civil Engineering Contractors Association acknowledged that the practice had become "rife" in the desperate competition for work during the late-2000s recession, but blamed the public sector procurement process for focussing on the lowest price rather than best value.[4]
Some commissioning bodies, such as Crossrail, openly discourage the practice.[6] In 2011, some housing associations began including specific terms in tenders to protect them from legal challenge in the event of refusing to award the contract according to the lowest tender.[3]